A5.3 In appraisal, uncertainty is often due to lack of evidence or understanding of the likely impact of new interventions. Research and previous evaluation evidence, pilot studies and evidence of what works can help to reduce this uncertainty.
A5.4 Optimism bias is the demonstrated systematic tendency for appraisers to be over-optimistic about key project parameters, including capital costs, operating costs, project duration and benefits delivery. The Green Book recommends applying specific adjustments for this at the outset of an appraisal. Optimism bias estimates are a form of reference class forecasting, which predicts future outcomes based on the outcomes for a group of similar past projects.
A5.5 Risks are specific uncertainties that arise from activities such as forecasting or implementation, the costs of which have been estimated. They are specific to an intervention and may be quantified and managed.